Crude oil production in the States fell to a 2-year low

Reduced, but still robust wind generation levels also helped keep overall gas demand subdued

With temperatures remaining above the seasonal norm across Ireland and the UK, demand on the UK gas system remained some 80MCM, or 25%, below normal for this time of year. Reduced, but still robust wind generation levels also helped keep overall gas demand subdued. The system ran in surplus throughout the trading day but gas prices at the NBP edged higher despite this. Spot and day ahead prices gained 0.60p while the front month was up by 0.52p on its penultimate trading day. Futures contracts beyond March recorded only marginal gains, averaging 0.29p on the day.  

GB baseload power futures moved higher again

GB baseload power futures moved higher again in line with gas, oil and EUA carbon prices with Winter 21 gaining £0.58/MWh. The Summer 22 contract recorded the biggest gain of the day, adding £0.73 to settle at £47.50/MWh. EU ETS unit prices recorded a fourth consecutive day of gains with contracts settling in a range between €39.10 and €39.90 per tonne. The day ahead baseload price gained almost £3.00/MWh as wind generation is forecast lower for today. Wind power contributed almost 10GW yesterday but is expected to halve today as weather conditions calm.  

Prices gained day-on-day with West Texas up and Brent crude gaining

The recent severe weather conditions in the U.S., particularly in the major refining hubs in Texas, left weekly inventory data difficult to assess. While crude oil production in the States fell to a 2-year low, refining activity was also dramatically reduced. Prices gained day-on-day with West Texas up 2.5% to $63.22 and Brent crude gaining $1.67 to settle at $67.04 a barrel. As the severe weather abates, refining activity is rapidly returning to normal and with crude prices above $60.00 a barrel, crude production in the U.S., particularly marginal shale production, will also increase. The ongoing conundrum facing OPEC and other major producers remains whether to relax production quotas in advance of increased economic activity as vaccines combat the Coronavirus.  

Crude oil continues to strengthen

Demand on the UK gas system is rising this morning as wind generation falls off. Gas-fired power demand has driven overall demand to 248MCM, still 60MCM below the seasonal norm and the system remains comfortably supplied. LNG is the main swing provider with little or no storage withdrawals so far this morning. Trading has been particularly sluggish with only the front month and summer contracts showing any movement. The March contract, which expires today, is down fractionally, as is the Summer 21 contract. Crude oil continues to strengthen with Brent crude up 50 cents to $67.54 a barrel.